What Is Tech Worth After the Selloff?

November’s rebound and the sudden departure of Nvidia’s chief executive reveal how much a technology stock’s price depends on confidence in future earnings.

On November 11, shares in CoreWeave rose nearly 25% after the company reported a quarterly loss of $709 million. The next morning, Nvidia announced that Jensen Huang, its co-founder and chief executive of 33 years, had resigned. Its shares closed down 4.3%, with its quarterly results still five days away. In the space of two trading sessions, investors had bid up a loss-making cloud operator and marked down the leading supplier of chips for artificial intelligence (AI).

The contrast helps explain why the November selloff was easier to measure than to interpret. On November 5, two days after the U.S. midterm elections, the Nasdaq Composite fell 5.5%. By November 11 it had recovered four-fifths of the points lost that day. Those index moves gave a fair account of what happened to a portfolio tracking the Nasdaq. They offered considerably less guidance about the price worth paying for any one company in it.

What the discount buys

By the close on November 5, the information technology sector of the S&P 500 traded at 17.1 times forecast earnings for the next 12 months, compared with 17.9 times for the index as a whole. It was the sector’s first discount since 2017, according to data from London Stock Exchange Group (LSEG) reported by Reuters. Even after the decline, technology accounted for more than 35% of the S&P 500. The valuation question mattered to anyone who owned a broad U.S. index fund.

The apparent bargain could disappear with a small revision to those forecasts. Hold share prices steady and cut the technology sector’s expected earnings by 5%, and its multiple rises from 17.1 to 18. That alone would erase the discount if the forecast for the broader market held. The investment case turns on how much faith to place in profits that companies have yet to earn.

Two sides of a chip order

At Advanced Micro Devices (AMD), a substantial part of the growth was already in the accounts. Third-quarter data center sales reached $8.5 billion, up 97% from a year earlier, as customers bought both conventional server processors and chips used for AI. Operating profit in the division rose from $1.1 billion to $2.9 billion. AMD generally books the sale of a standard processor when it ships under the terms of the contract. Its shareholder can see the margin on that sale while the buyer is still installing the equipment.

CoreWeave earns its money on the other side of such a transaction. It buys computing equipment and rents capacity to customers. Third-quarter revenue more than doubled to $3.66 billion, and management raised its full-year sales forecast. Yet net interest expense of $846 million was more than four times the quarter’s operating profit. A shareholder could reasonably welcome the stronger outlook and still ask how many years of rental income it would take to justify the cost of the machines.

The terms of those rentals help explain the rebound. CoreWeave’s customers generally agree to pay for reserved capacity even if they use less than they booked. Its September backlog stood at $132.5 billion, subject to delivery and service requirements. On November 12, another cloud operator, Nebius, illustrated the significance of that qualification. Customers had kept their commitments, but some third-party data centers would be ready only in the first half of 2027. Some of the revenue that investors had counted on for 2026 moved with them.

The arithmetic can also work in an operator’s favor. Microsoft said some capacity due from outside suppliers was delayed in its September quarter. Its engineers found spare capacity in processors the company already owned and put it to work for customers. Azure revenue grew 48% from a year earlier. For a shareholder in a cloud business, getting another paying customer onto an existing machine can be a better outcome than ordering a new one. A shareholder in the chip supplier has a different interest in that next order.

The founder in the forecast

Nvidia’s board had expressed confidence in Huang on November 8 when it announced an independent investigation. Three days later, the directors accepted his resignation as president, chief executive and board member. On November 12 the company announced that Colette Kress, its chief financial officer since 2013, would serve as interim chief executive while the board sought a permanent successor. The board said it expected customer commitments and product development to proceed on schedule.

Investors had to decide what the change was worth before they had a fresh set of accounts. Nvidia’s 4.3% decline that Thursday compared with a 0.4% fall in the Nasdaq Composite. AMD rose 5.9% and Broadcom gained 5.5%. A single session cannot tell shareholders how much of Nvidia’s value they had assigned to Huang. It does show how widely the prices of three chipmakers could diverge while their customers were still pursuing the same data center projects.

A founder’s influence rarely appears as a separate assumption in an earnings model. It can sit inside a forecast for how quickly a new chip will reach customers, how many buyers will adopt it, or what price the supplier can command. Kress brought considerable knowledge of the business to the role. Shareholders nevertheless had to judge which relationships and decisions Nvidia’s management team could carry forward as readily as its founder had. They could leave their estimate of next quarter’s profit untouched and still be willing to pay less for the years beyond it.

For an institution holding both the suppliers and the operators, November’s trading offers a way to read the next round of results. At AMD, the margin on a shipment is already visible. At CoreWeave, the return will emerge as customers pay for capacity and the company services the financing. At Nvidia, some of the most valuable evidence will come when customers decide whether to place their next orders under a new chief executive. The sector’s earnings multiple puts a single price on those expectations. The companies will earn it on very different schedules.

About Berkeley Financial

Berkeley Financial serves institutions and private clients with financial interests across borders. The group provides institutional and private banking, investment services, custody and securities financing.

Disclaimer

Berkeley Financial provides this article for informational purposes. It does not constitute investment, legal or tax advice, an offer to buy or sell securities, or a recommendation concerning any company mentioned. Market prices and earnings estimates reflect the dates cited. Forecasts may change, actual results may differ, and investors may lose capital.

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What Is Tech Worth After the Selloff?

November’s rebound and the sudden departure of Nvidia’s chief executive reveal how much a technology stock’s price depends on confidence in future earnings.

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